Economists worsen the GDP growth forecasts do not rule out a new collapse

The organization for economic cooperation and development (OECD) downgraded its forecast for Russian economic growth for the current year. According to experts, Russia’s GDP will grow by 1.6%. Previously this estimate was 1.8%. The forecast for the Russian Federation in 2019 and 2020 saved — 1.5% and 1.8% respectively. For comparison, the world economy, according to OECD, in 2018-2020 will increase by 3.7%, 3.5% and 3.5%, and GDP of the countries «big twenty» — 3.8%, 3.7% and 3.7% on year.

The forecast of the OECD for Russia in General coincides with the opinion of the main economic departments of the country, except that of the Ministry, which is responsible for the growth, it is a bit more optimistic. The baseline forecast provides for the MAYOR in this year’s GDP growth of 1.8% in 2019, and 1.3%, in 2020 — 2%. But in 2021, the economy must accelerate to 3 percent. The Central Bank is waiting for in the current year’s growth at 1.5−2% in the next two years is 1.2% and 1.7% and 1.8−2.3 percent. Last year, we will remind, the Russian economy grew by 1.5%.

By the way, the OECD is slightly downgraded forecasts for most major countries. As the organization notes, global economic growth remains strong, but its recent peak passed, and trade disputes and political uncertainty are complementary to the difficulties faced by the state.

In the case of Russia, this uncertainty can play an even greater role, because the increasing of the pressure of sanctions and falling oil prices cannot be discounted. In this case, the economy in 2019 may slow down to 1%, which can hardly be called growth. Bloomberg experts, for example, believe that the economic pressure of the US and EU will hurt the Russian economy to reach the projected figure of 3% of GDP by 2021, and to date, the Russian economy has lost about 6% of GDP in 2014 due to limitations.

Oil prices have already dipped by 26% over the past few months, and a barrel of Brent crude is 86 dollars worth only 62. The President of the United States Donald trump in his Twitter thanked for the decline in Saudi Arabia and urged to lower the price even lower.

Perhaps all this will make the experts next month to once again review the forecasts on the Russian prospects in the coming years, which many already viewed with skepticism. For example, the international rating Agency S&P predicts growth in GDP in 2019-2021 years at 1.7−1.8% of GDP. The promised spurt due to the growth of investment in fixed capital, according to international analysts, will not take place because of the «characteristic of Russia a long process of investment decision-making and complex structures for the distribution of funds for major projects with the participation of the state.»

Nothing good from 2019, the year is ticking away, and the head of the chamber Alexei Kudrin. In his opinion, the growth could be even less than predicted economic development of 1.3%, although this is also a very modest figure, and will be «around 1% or less than 1%» because of current and potential sanctions. The chief economist of Vnesheconombank Andrei Klepach predicted growth in the area of 1-1,3%.

The Central Bank and all began to prepare for the most negative development of events. As the head of the Central Bank Elvira Nabiullina at the hearing on 21 November, the regulator does not rule out a scenario of falling oil prices to $ 35 per barrel. In this case, a possible recession in the economy, the acceleration of capital outflows and a return of inflation to double-digit figures.

«This does not mean that we consider this a likely scenario, but we need to understand how the situation will develop in a negative scenario,» she said. The baseline scenario envisages that the average oil price will be 63$. in 2019 and $ 55. in 2020-2021 years.

Among other factors slowing Russian economy, in addition to the sanctions, and oil experts call and internal circumstances. This increase in VAT from 18% to 20% from 1 January 2019, the effect of fiscal rules in which budget revenues are over $ 40 per barrel is not being spent, and go to reserves and capital outflows. Another reason is the tight monetary policy of the Central Bank. Experts say that in the face of external pressures it can be justified, but in General the lack of cheap credit leads to slower economic growth.

Chief economist of Fund of economic researches «the development Center» HSE Valery Mironov agrees with the forecast of 1.3% for next year, but indicates that if the price of oil goes down, we need to prepare for a new fall in GDP.

— This year we estimate growth at about 1.8%. Assuming the baseline scenario, which assumes an average price of oil at around 68 dollars a barrel in 2019, the year, the GDP growth we forecast at 1.3%, lower than the OECD. Investment growth will remain at the same level this year, but will slow sharply the growth of real wages. If this year they grew by 7.3%, the next increase by only 1.5% in real terms. Nominal wages will increase the average, with 43.4 per thousand to 46.4 thousand

In addition, we are expecting a two-fold slowdown in the growth of exports, which this year is stalling the economy. We believe that the government will not go on increasing spending budget and they will remain at the same level this year relative to GDP. Revenues will increase slightly due to the uniformly high oil prices over the next year.

That is the whole scenario is not the worst, however, inflation accelerated to 5.1% due to the VAT increase. The dollar will be fairly stable, we expect it at the level of 65 rubles per dollar.

«SP»: — If oil prices do not significantly fall, why there is such a slowdown?

— First of all, because this year actively increase salaries, to execute the decrees of the President. If last year real wages grew by 3.9%, this is 7.3%. This was made almost two percentage points to GDP growth, as many other indicators have made a negative growth. But in the following year, this growth of salaries in the public and private sector will not.

Investment growth will slow by the end of this year and will accelerate next. Investment activity is consistently low because its growth follows the growth of the economy as a whole. If the economy is not growing, not growing, and attachments. Because why invest if not increased load of old capacity?

The salary also arise from economic growth if they artificially stimulate the growth of oil prices. Hence, there will not be increase. What remains to accelerate the growth of the economy? Remains exports, which are determined by external factors. But in order to go export growth necessary to support it. We now have a lot of restrictions on the foreign market. You need to improve the image of Russia, to enter new markets.

But the government puts in first place the growth of investments, not exports. Against the backdrop of sanctions and wage struggle in the world exports without support will slow down from 5.2% to 2.4%. And export is up to 30% of GDP. Slowing him down by 3 percentage points is still minus one percent to GDP growth.

In addition, the state saves, it does not increase costs. The Federal budget balance will remain positive at 25% of GDP. The government will pursue a policy of savings and accumulation, and on the background of the slowdown in the other areas I mentioned, this will mean that growth will be, but at 1.3% instead of 1.8% this year.

«SP»: — And if you are negative scenario of the Central Bank with the fall in oil prices?

— If the price of oil falls to $ 35 per barrel, we will have minus one percent of GDP. The economy in the next two years will fluctuate around zero. The investment will go into negative figures, and it will be the most significant factor that will affect the economy. Even more, slowing the pace of export growth. The ruble will fall to 75 rubles by the end of 2019.

Fortunately, while the experts call such a scenario is not too likely. However, given that just a month ago many analysts predicted the rise of a barrel to one hundred dollars instead of the current drop, it can be stated that the oil market remains unpredictable, and we can expect anything.

The current correction in the oil is from a fundamental and from a technical point of view, — says the head of analytical Department of Grand Capital Sergey Kozlovsky. — After a long period of neutral a news series of posts about increasing oil production in the United States, Russia, and Saudi Arabia immediately reflected in the quotes.

From a technical point of view, oil price chart was in serious overbought, in the absence of additional drivers to growth of the price has bounced from the upper border of the channel and at the moment traded at the support line of the trend channel. While the schedule is still within the designated corridor, one should not expect a serious fall. Start to worry after the price movement below $ 55 per barrel.